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CDIAC provides information, education and technical assistance on - - PowerPoint PPT Presentation

Nov 21, 2022 191 likes •398 views

CDIAC provides information, education and technical assistance on public debt and investments to local public agencies and other public finance professionals. 1 2 3 4 Not Concerned About Arbitrage? Not so Fast Tuesday, November 8 th

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CDIAC provides information, education and technical assistance on public debt and investments to local public agencies and other public finance professionals. 1

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| 5 Continuing Disclosure Issues – Material Events| 5 | 5

Not Concerned About Arbitrage? Not so Fast…

Tuesday, November 8th 10am – 11:15am

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| 6 Continuing Disclosure Issues – Material Events| 6 | 6

Discussion Topics  Arbitrage Math Concepts  IRS Audit Hot Buttons  Documentation and SEC Disclosure

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| 7 Continuing Disclosure Issues – Material Events| 7 | 7

Primary Math Concepts

  • Arbi

rbitrage R Reba bate

  • Yield R

Reduct uctio ion P n Payment

  • Spend

nding ing E Exceptio ions ns

  • Transfe

ferre rred P Proc

  • ceeds
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| 8 Continuing Disclosure Issues – Material Events| 8 | 8

Arbitrage Rebate

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| 9 Continuing Disclosure Issues – Material Events| 9 | 9

Yield Reduction Payment

Arbitrage Earned Period Example 1 Example 2 Example 3 Year 1 -3 Unrestricted 10,000 (9,000) 8,000 Year 4 - 5 Restricted 5,000 7,000 (2,000) Rebate Payment 10,000 6,000 Yield Reduction Payment 5,000 7,000

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| 10 Continuing Disclosure Issues – Material Events| 10 | 10

Spending Exceptions

100%

1

6 mos.

15% 60% 100% 6 mos 12 mos 18 mos

10% 45% 75% 100% 6 mos 12 mos. 18 mos. 24 mos.

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| 11 Continuing Disclosure Issues – Material Events| 11 | 11

Spending Analysis

Period Period End Date Cumulative Percentage Required Cumulative Amount Required Cumulative Amount Actually Spent Amount Exceeding / (Below) Requirement Six Month 23-Aug-06 10% 10,702,878.95 $ 31,144,712.06 $ 20,441,833.11 $ Twelve Month 23-Feb-07 45% 48,162,955.27 53,018,920.06 4,855,964.79 Eighteen Month 23-Aug-07 75% 80,271,592.12 69,184,284.06 (11,087,308.06) Twenty-Four Month 23-Feb-08 100% 107,028,789.49 106,253,656.73 (775,132.76) Final 23-Feb-09 100% 107,028,789.49 106,253,656.73 (775,132.76)

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| 12 Continuing Disclosure Issues – Material Events| 12 | 12

Transferred Proceeds

Call/ Principal Cumulative Cumulative Transfer Called Outstanding Transfer Transferred Non-Transferred Dates Principal Prior to Call Percentage Proceeds Ratio Proceeds Ratio 02/01/2008 545,000.00 $ 25,990,000.00 $ 2.0970% 2.0970% 97.9030% 02/01/2009 565,000.00 25,445,000.00 2.1739% 4.2709% 95.7291% 02/01/2010 590,000.00 24,880,000.00 2.2701% 6.5410% 93.4590% 02/01/2011 24,290,000.00 24,290,000.00 93.4590% 100.0000% 0.0000% Totals 25,990,000.00 $

  • $

100.0000%

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| 13 Continuing Disclosure Issues – Material Events| 13 | 13

Bond Yield Comparison

0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 2006 2007 2008 2009 2010 Variable Rate Yield Fixed Rate Yield Variable w/SWAP

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| 14 Continuing Disclosure Issues – Material Events| 14 | 14

Use of Proceeds Scenarios

A.

  • A. Sp

Spent q quickly b but m misse ssed Sp Spending Except ption

  • n

B.

  • B. Pro

Project s stal talled afte after thre r three y year ears C.

  • C. Di

Didn’t s spe pend pr proceeds

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| 15 Continuing Disclosure Issues – Material Events| 15 | 15

Spent Quickly Missed Spending Exception

0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 2007 2008 2009 2010 2011 Fixed Rate Bond Variable Rate Yield Investment Yield

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| 16 Continuing Disclosure Issues – Material Events| 16 | 16

Project Stalled after 3 years

  • 1.00%

0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 2007 2008 2009 2010 2011 Fixed Rate Bond Variable Rate Bond Investment Yield

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| 17 Continuing Disclosure Issues – Material Events| 17 | 17

Minimal Proceeds Spent

0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 2007 2008 2009 2010 2011 Fixed Rate Bond Variable Rate Bond Investment Yield

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| 18 Continuing Disclosure Issues – Material Events| 18 | 18

IRS Audit Hot Topics

A.

Actual Dr Drawdown wn Sc Schedule le of Bond

  • nd Procee

ceeds (Ha (Have You Spent nt Bon

  • nd Pr

Proceed ceeds Within in Three ee Yea ears rs?) ?) B. Hav ave you Ma Made your Re Rebate Payment nts in in a Tim imely Ma Manner nner? C. Are Bon

  • nd Pr

Proceed ceeds Yield Res Restrict cted ed after er Three ee Ye Years? D. Do Do th the Reb Rebate Repor

  • rt Schedules match

tch th the Issuer’s ’s Bon

  • nd Alloc

Allocation

  • n for
  • r Other

er Pur Purposes es? E. Hav ave You Co Comp mpli lied with th the IRS RS Sa Safe-harbo bors for Gua uarant nteed Inv nvestment Cont

  • ntracts or for
  • r bid

iddin ing open market et secur ecurities es for

  • r a Refund

nding ng Es Escr crow?

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| 19 Continuing Disclosure Issues – Material Events| 19 | 19

Documentation and SEC Disclosure

A. A.

Once t there is is a a Tax ax I Issu ssue mu must y you Disc isclose I It? B. B. Wha hat D Disclosure Tre Trends a are re The There for Ta for Tax Ma Matters Sectio ions? s? C. C. Post st I Issu suan ance C Compl mplia iance - Wha hat Typ Type of

  • f Wri

ritten Pro rocedures Do I n

  • I need?
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To sign up for CDIAC’s seminar notification service visit: www.treasurer.ca.gov/cdiac and click on “Sign Up to Receive Information on CDIAC Seminars and Publications”